Leap: 60% of New Customers Chose Smartphones

By around the middle of next year, Cricket provider Leap Wireless (NAS: LEAP) said that fully half of its customer base will be comprised of smartphone and Muve Music users. Speaking at the Goldman Sachs Communacopia Conference, Leap CEO Doug Hutcheson said smartphone sales continue to grow among the carrier's new customers, and that during the month of July, 60 percent of the carrier's net subscriber additions selected smartphones as their device of choice.

The news is notable considering Leap formed its business around selling inexpensive phones and service to lower-income subscribers. Now, due to Americans' rapacious demand for smartphones, Leap's average revenues per user are on the rise thanks to the more expensive service plans that are tied to the sale of smartphones. Leap's no-contract smartphone service starts at $55 a month, whereas the company's unlimited feature phone service starts at $35 per month. Leap's ARPU in the second quarter of 2010 was around $38, and in the second quarter of this year, it grew to around $40.

Further, Hutcheson said around 27 percent of Leap's total customer base is made up of smartphones and Muve Music devices (the carrier counted 5.7 million customers at the end of the second quarter).

"We feel like we have a long ways to go on that," Hutcheson said, predicting that half of Leap's customer base will own smartphones or Muve Music devices by around the middle of next year.

Hutcheson also said that smartphone users tend to stay with the carrier in greater numbers than users of feature phones. He said Leap's smartphone churn was around 2 percent in the second quarter, whereas the carrier's feature phone churn was around 4 percent.

And perhaps most importantly, Hutcheson said the average smartphone customer "has about twice the lifetime value of a feature phone customer."

He said Leap will launch additional smartphones in time for the holiday shopping season.

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